Forex Trading Signals part 3 is a continuation of my last article in which I introduced 2 basic types of candlesticks- Long versus Short and Marubozu. As now we have a basic understanding of what a typical candle stick chart depicts and some types of candle sticks, I will continue to merge or link some other important types of candle sticks using the basic knowledge. Different types of candle sticks are worth remembering as they provide different Forex Trading Signals.
In today’s article I would be discussing another two types of candlesticks which are as under:
- Long versus Short Shadows
- Spinning Tops
Long versus Short Shadows can be very useful as it generates important Forex Trading Signals. The upper shadows on the candlestick depicts trading session highs for a given period of time while on the other hand the lower shadows shows the trading session lows for a particular time frame. The candlestick chart below shows the difference between long and short shadows.
Candlestick Chart
The Long Upper shadow gives out trading signals that the buyers were dominant in the session bidding up prices but on a later stage the sellers were able to pull down the price creating a weak position, thus a long upper shadow. On the other, side the long lower shadow gives a trading signal that the sellers were dominant in the session, deriving the prices lower but on a later stage the buyers were able to pull the price up creating a long lower shadow.
Another type of candlestick which can be useful in generating correct Forex Trading Signals is known as Spinning Tops. Spinning Top candlesticks can easily be found on any candlestick chart. A candlestick chart below shows a typical spinning top candlestick.
Candlestick Chart
Spinning Tops candlesticks usually have long upper and lower shadows with a very small real body as shown above. The long upper and lower shadows shows that the price of a given currency pair in a specific time frame remained little or unchanged but there was a lot of price movement in both directions. The shadows give a typical Forex Trading Signal showing that in a certain specific time frame both the bulls and bears fought against each other but none came out as a dominant at the end of the session and the result was a standoff.
Spinning top candles after a long blue candle indicates that there is a weak bullish sentiment ahead and a possible change in trend. Similarly, spinning top candles after a long red candle gives out a trading signal that there is a weak bearish trend ahead and there is a strong possibility of a change in trend.
This brings an end to today’s article. I am trying to slowly introduce new terms and trading jargon so that it becomes easy for beginners to understand. Keep a follow up as in my upcoming article I will further introduce different types of candlestick and explain how they help in generating different Forex Trading Signals.
